INDIA Trends and Developments Contributed by: Anuja Tiwari, Mallika Anand, Pranjal Bhattacharya and Antra Shourya, AZB & Partners
The success of M&A deal-making backed by W&I insurance is evidenced by its growing acceptance in India, especially given that it allows the seller to effec- tively cap its potential liabilities after the deal closes. Such transaction mechanism is advantageous in situ- ations where: • the sellers are venture capitalists or private equity funds intending a clean exit post-closing; or • the seller is a limited-life entity whose remaining term of existence is shorter than the potential claim period for the withholding tax risk. The increase in W&I insurance is likely to continue in response to several factors, including: • the growing enterprise value of deals across the energy and infrastructure sectors; • the entry of multiple players in the underwriting space and their ability to provide W&I insurance across sectors; • the growing risk appetite of insurers; and • an increasing number of sellers that are limited-life funds. Joint ventures as a corporate vehicle for exploration As opposed to development of renewable energy pro- jects through traditional sources such as solar and wind, the impetus on green hydrogen, green ammo- nia and nuclear energy has driven conventional fuel- based companies to explore the potential that these newer sources of renewable energy present. Energy companies are diversifying their portfolio by entering into strategic partnerships for the development of green hydrogen projects and electrolysers. Examples include: • the proposed joint venture agreement between Bharat Petroleum Corporation Limited and Semb- corp Industries for the development of green hydrogen projects; • the joint venture between Adani Enterprises Lim- ited (through its wholly-owned subsidiary in Sin- gapore) and Singapore-based Kowa Holdings Asia Pte Ltd for sales and marketing of green hydrogen and its derivatives, to be manufactured in India under Adani New Industries Limited;
• an Indian joint venture between the US-based Air Products and the INOX Group for the development of a green hydrogen plant in Rajasthan; • the joint venture between Indian Oil Corporation Limited, L&T and Renew Power Limited to develop green hydrogen projects; and • a separate joint venture formed between Indian Oil Corporation Limited and L&T for the manufacture of electrolysers. There have been some notable joint ventures for the development of smart metering projects, railway pro- jects, and logistics as well. Rise of renewable energy IPOs For close to a decade now, renewable energy com- panies in India have attracted foreign private equity investors, institutional investors and other global funds – either in the form of platform deals or through stra- tegic investments. With India’s commitment towards green energy transition, the renewables industry has evolved into a high-yielding sector with a long-term value trajectory reflected in relatively lower capital expenditure (particularly in the solar power sector) and consistent cash flows propelled by the ever-increasing energy demands. In the Indian context (where public markets have been increasingly active with public listing), the renewable energy sector has recently has witnessed a consider- able rise in IPOs with attractive valuations. The cur- rent pipeline for projected IPOs includes the green energy arms of prestigious state-owned companies such as ONGC Green, NHPC Renewable Energy and SJVN Green Energy, as well as SECI – all of which are expected to raise up to an estimated USD8 billion in next few years (according to Mergermarket). These IPOs are expected to involve significant participation India’s supportive sectoral regulatory regime and growth-focused policies and incentives have result- ed in the creation of large-scale assets across the energy and infrastructure subsectors that are bank- able. Despite the downturn in the global economy, inflationary trends, and the overall decline in private equity/venture capital investments, the energy and from foreign institutional investors. Continued private equity confidence
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